“zombie was bested by its vampire controller, GM/GMAC” … “but capitalism is not offensive”
In 2008, a bankruptcy court decided the case of Leibowitz v. GMAC in which it was alleged that “GMAC conspired with its affiliate company General Motors Corporation (“GM”) and GM’s long time customer, Penske Truck Leasing (“Penske”), to strip the debtor CTC [Chicago Truck Center] of its assets.”
The Trustee in bankruptcy tried to reclaim debt monies repaid before the bankruptcy under the theory that the truck company debtor had really been insolvent for years and that GMAC had propped it up for the unjust purpose of preferencing the Penske debts though a “floor plan financing agreement”.
Judge Hollis writes the opinion for the US Bankruptcy Court, Northern District of Illinois Eastern Division and quotes from the Trustee’s post-trial memorandum:
In sum, it is clear from the evidence that CTC was never more than a prop that GM/GMAC used in a stage show that was needed to kept [sic] the Penske fleet business.
…Faced with the loss of the all important Penske business, GM/GMAC raised CTC from the grave into which its long-standing insolvency and the $ 3.5 million conversion had put it, and pushed their new zombie back into the world of commerce with a 100,000 jolt in the form of the Penske Obligation. But, like all zombies, CTC needed new blood, which it found in the form of goods and services from its vendors and employees. However, the zombie was bested by its vampire controller, GM/GMAC, which sucked that new blood right back out, and CTC eventually was placed involuntarily in its Chapter 7 tomb.
The Trustee claims
It was a sophisticated plan that was efficiently executed with arrogant contempt for the law, other creditors, and basic morality.
But the Court does not agree, benchslapping the Trustee in footnote 9:
The Trustee’s Post-Trial Memorandum was presented as a work of fiction, complete with headings entitled “The Dust Jacket”, “Plot Synopsis”, “The Characters”, and “The Novella in the Form of Argument”. While entertaining, much of his story was fiction and not supported by the evidence.
The Court goes on, with further benchslap to the Trustee:
The only way the Trustee can pin this obligation on GMAC is to prove that GM and GMAC were alter egos. Courts are reluctant to disregard the corporate form, however. In order to do so, the Trustee must make “a substantial showing that the corporation is really a dummy or sham for a dominating personality.” There is no evidence of that. The corporations were separate and the books and records were separate. This is illustrated by GMAC’s insistence that GM guarantee any capital loan that GMAC might consider extending to CTC. Alter egos don’t ask for guarantees. It is useless to guarantee one’s own risk. The corporations are and were independent legal entities, which cannot be collapsed into one company just because an internal memo uses a “/” between GM and GMAC.[citations omitted]
Later the Court further emphasizes that insufficiency of the Trustee’s evidentiary record:
Effectively, he [the Trustee] gambled that this court would agree that an internal memo’s use of a “/” between GM and GMAC would permit this court to disregard the independence of these two corporations and enter a judgment requiring GMAC to pay the estate millions of dollars of profit earned by GM. He is wrong.
The Court also rejects other reasoning:
Nor can the fact that two companies act or meet for their mutual benefit dissolve their separate legal existence. This would mean that parties on the opposite side of a contract, if their business benefits both, become the same legal entity. That is absurd and no authority is referred to in support of this concept.
After reviewing all of the evidence, this court concludes that GMAC was trying to help CTC retain Penske as a customer. It may have profited by financing CTC, but capitalism is not offensive.
For the reasons stated above, judgment is entered under 11 U.S.C. §§ 548(a)(1)(A) and (a)(1)(B) and 740 ILCS 160/5(a)(1) and (2) and 740 ILCS 160/6(a) in favor of the defendant, General Motors Acceptance Corporation, and against the plaintiff, David Leibowitz, as Chapter 7 Trustee for the Estate of Chicago Truck Center, Inc.
It should be noted that though these claims arise from late 1990′s and CTC went bankrupt in early 2000s, this case was decided in late 2008. By this time GM was itself nearly insolvent and already in need of a government bailout. President Bush had already approved the first parts of the bailout by the time of this decision.
AND, in the wake of the automotive and financial crisis Rolling Stone journalist Matt Taibbi coined the phrase “giant vampire-squid” to refer to Goldman Sachs corporate greed. In his 2010 Rolling Stone article “The Great American Bubble Machine“, Tahibi wrote:
The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.
And Kevin Roose at the NyTimes documented the relationship of that Vampire Squid metaphor to the Occupy movement in “The Long Life of the Vampire Squid”:
“Capitalism is not offensive” to Federal Judges (and as a matter of US government policy) but it may be so for many bloggers, Occupiers, and Rolling Stone journalists. In the particular bankruptcy case I discussed above, it is the Trustee of a supposed zombie (CTC) trying to sue “its vampire controller, GM/GMAC” for using the zombie; propping it up only to bleed it dry by feeding to a preferred pet (Penske). The suit is against GMAC only claiming an overall corporate interest for General Motors, which is at this point already in government bailout. I posted link earlier to Gary North article on LewRockwell.com entitled “Zombie Banks and Vampire Governments”. From that perspective, it is the governments that are the vampires and the banking corporations are zombie. But from the perspective of Federal Judge Pamela Hollis, corporate veils are holy fences, and the idea that GM/GMAC could be one entity is absurd; like Alice and Wonderland, read the literal and look at the “/” between the letters. If they were only one corporation why would there be a slash?
Clearly there are two of them
`It’s the oldest rule in the book,’ said the King.